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“It is very likely that China has overtaken the U.S. to become the world’s largest trading country in goods in 2013 for the first time,” said Zheng Yuesheng, spokesman for China’s General Administration of Customs, on Friday while announcing December—and therefore full year—exports and imports.

China’s trade volume, he said, was $389.8 billion in December, a monthly record. Exports, by the way, accounted for a spectacular $207.7 billion.

The country’s trade performance last year was certainly impressive.For the first time ever, China’s trade topped $4 trillion.For all of 2013, China’s exports hit $2.21 trillion.Imports rose to $1.95 trillion.The 7.6% increase in total trade narrowly missed Beijing’s ambitious 8.0% goal for the year.Zheng called the result “a landmark milestone for our nation’s foreign trade development.”

Surpassing the U.S. is, as Zheng tells us, a truly important moment. Yet it is a sign of China’s rise only if it is true, and few believe Beijing’s trade numbers are reliable.China Customs, everyone agrees, counted a substantial number of fictitious export transactions last year.

Analysts say that, even if exports were accurately reported, China would still take the crown from America.They point out that when the Department of Commerce releases 2013 trade figures next month, we will see that China topped the U.S. by about $250 billion.Just about everyone makes the reasonable-sounding argument that Beijing’s numbers, as atrocious as they are, cannot possibly be a quarter trillion dollars off.

So how bad are Chinese trade statistics?Experts, when discussing the reliability of the numbers for last year, always point to suspicious January-April exports to Hong Kong, which, although part of the People’s Republic, is a separate jurisdiction for customs purposes.

During those four months, currency smugglers used faked export documentation to bring hot money into China.Many participants benefited from their paperwork party, most notably investors and speculators betting on a rising renminbi and desperate Chinese companies scrounging for cash from offshore lenders.At the same time, exporters were committing VAT-refund fraud by submitting fake paperwork purporting to show exports to Hong Kong.

There is no question that fake exports to Hong Kong during that four months amounted to less than $250 billion.Global Financial Integrity, the research and advocacy non-profit, compared Chinese and Hong Kong statistics and found that China’s exports to Hong Kong in the first quarter of last year, as reported by Beijing, were $54.6 billion larger than Hong Kong’s imports from China, as reported by that city, during the same period.Despite a reported crackdown on false invoicing in May by Chinese authorities, the discrepancy in Q2 stats was also large.It appears that, in first half of 2013, $93.0 billion illegally entered China through fake export invoicing involving Hong Kong.

Yet fictitious exports to Hong Kong in the first half of the year are by no means the end of the story.False transactions started to reappear perhaps as early as July.Reuters attributes unexpected export strength in September to “hot money inflows” of $16 billion and suggests there was $24 billion in illicit transfers in October.It also reported Beijing’s November data looked “suspicious.” Even though December’s export growth of 4.3% disappointed, the figure nonetheless deserves close examination.We have to remember that the increase was off the very high base of December 2012, a month almost certainly artificially inflated.

The resurgence of fake exports after the May crackdown shows that the problem has become not only widespread but intractable.China’s strict currency controls are no match for those determined to move money into the country.

And we have to remember that China’s statistics are distorted by fake import documentation too as the Chinese continue to take money out of their country.Capital flight—and not an improving economy—looks like the primary reason why last month’s import growth of 8.3% year-on-year caught analysts off guard.

Despite everything, China Customs is standing by its official numbers.Mr. Zheng has even specifically defended his agency’s Hong Kong export statistics.This means that Beijing’s trade numbers for 2013 are totally suspect, certainly inaccurate to a significant degree, and this inaccuracy will have knock-on consequences.They will, for instance, inflate the official gross domestic product estimate, scheduled to be released by the National Bureau of Statistics on January 20.

Because China Customs refuses to restate its trade numbers, the only way we can understand the country’s trade position is to cross check its numbers with those from all of China’s trade partners.The variances are bound to be substantial, and not just those with Hong Kong.After all, China reported that exports to South Korea in 2012 increased 5.7% while South Korea reported that imports from China that year in fact dropped 6.8%.And we should note that much of South Korea’s trade with China does not pass through the southern port of Hong Kong.

Zheng may be ultimately correct when he boasts that China is now the world’s largest trading nation, but at this moment he’s just bragging and we do not have enough information to verify his claim.